Beroni & Corelli 2021 FamCAFC 9

The Full Court Decision of Beroni & Corelli [2021] FamCAFC 9 assists practitioners to develop their understanding of the concepts that were so significant in the 2017 Decision of Thorne v Kennedy.

The husband appealed from an order setting aside a Binding Financial Agreement between the husband and the de facto wife.

The wife at trial had successfully “impugned the validity of the BFA by reason of undue influence and unconscionability on the part of the husband at the time of the wife entering into the BFA dated 7 April 2011.”

In 2021, the husband is 88 and the wife is 53.  That means at the time of the agreement, the husband was 78 and the wife was 43.  Both parties have adult children to prior relationships.

The parties were introduced in December 2009 and by at least May 2010 they had commenced living together in the husband’s home.

This, notwithstanding, that the husband could not speak the language of the wife’s country, and the wife had limited English, she knew some of the husband’s country of origin language, and there was some communication.

From early in the relationship the husband had told the wife he wanted her to sign a BFA. Eventually, a BFA was drawn up and the wife signed it on 31 March 2011 in the presence of her solicitor and the husband on 7 April 2011.

Importantly, the BFA was in English and it was not translated into either country G’s language or country K’s language to the wife and any explanation of its terms to the wife were in English.

The BFA provided for a situation that if the relationship ended, the wife would not be entitled to make any claim on the assets which the husband brought into the relationship no matter how long the relationship between them had continued or what contributions either of them had made during it. The assets built up during the relationship would remain capable of division in accordance with their respective contributions.

Later in 2011, the wife divorced her country of origin first husband and applied through a migration agent a spouse visa.

In mid-2013, the parties started to discuss a new BFA.  They had different explanations as to why this conversation began, but no subsequent BFA ensued.

They separated briefly in 2014 and agreed to marry.

In November 2014, the husband executed a Will providing the wife with the use of the house for 12 months after his death and a payment of $3M.  The relationship ended in May 2016 and on 16 May, the wife commenced proceedings seeking a declaration of the existence of a de facto relationship order setting aside the BFA and property settlement, spouse maintenance and costs orders.

“A critical issue for the primary judge’s findings of undue influence and unconscionability was the wife’s proficiency in English at the time she signed the BFA on 31 March 2011.”

The trial judge was satisfied the wife was still not proficient in English at the time she entered the BFA.

The wife met with a solicitor.  She was not accompanied by an interpreter although the solicitor had asked her to bring one. The court found that upon balance,  “It was the husband who refused”. The wife’s solicitor, “on his own initiative and without instructions from the wife” wrote to the husband’s solicitor “expressing his concerns about the terms of the BFA and suggesting amendments to it.  The major concern was that the agreement provided that no matter how long the parties’ relationship continued for, the wife had no financial recourse if it came to an end“. This “caused the husband to become annoyed”.

The wife attended again upon her lawyer and signed the agreement.  The wife’s solicitor’s diary note was available.

The trial judge found, “However, it is inconceivable that within the 30 minutes’ duration of that consultation there was anything approaching fulsome advice given or even a proper explanation of the BFA itself”.

At paragraph 205 of this decision, the court set out the nine reasons that the wife gave to explain that she was in a position of special disadvantage.  They are:

  1. She could not speak, read or understand English well, and was dependent upon the husband to assist her to do so:
  2. She had no understanding of the law of property division upon the breakdown of a de facto relationship, whereas the husband did;
  3. She could not read the BFA, whereas the husband could;
  4. She was dependent upon the husband not informing immigration authorities of her breach of her guardian visa terms;
  5. She was dependent upon the husband for her financial security in Australia, in that as at 31 March 2011, she was unable to work in the country, and her only form of income was an allowance in the sum of $2,000.00 per month which the husband was paying her;
  6. She was dependent upon the husband for her accommodation, and she had no residence of her own in Australia, or the means to acquire one, albeit perhaps she could have rented;
  7. She likely did not know that the BFA was manifestly unfair until she was told that by Mr E on 31 March, by which time she had already determined to sign it;
  8. The only way that the wife could acquire permanent residence in Australia was by remaining in a relationship with the husband and obtaining a permanent visa, however the wife knew that if she did not sign the BFA, the relationship would not continue, at least past three years; and
  9. The wife was fearful of returning to Country G because of her ex-husband, which the husband was aware of.”

The trial judge said, I am satisfied all of those matters are established on the evidence.”

The trial judge went on to say, “In addition to them, I am further satisfied that the husband was generally controlling of the wife, and that she was somewhat fearful of him”.

At paragraph 207, the trial judge said, All of these, to my mind, combine to establish that the wife was indeed in a position of special disadvantage, vis-à-vis the husband, at the time she signed the BFA“.

At paragraph 208, the trial judge said, I am not persuaded that the wife had any real understanding as a result of her discussion of 30 minutes with Mr E on 31 March, as to the sort of value of claim which she would be giving up“.

The wife submitted to the Full Court “the fact that the wife was advised against signing the BFA but did so anyway may be an “˜indicium of undue influence’ as was held to be the case by the plurality in Thorne v Kennedy.  We agree with this submission“.

The Full Court determined that it was open to the trial judge on the evidence to find there had been actual undue influence.

The husband’s second ground was that the primary judge had erred in finding that there was actual undue influence by virtue of the matters identified at paragraph 214 of the Reasons.

The wife’s contention was that this position was misconceived for at least three aspects set out at paragraph 41a., b. and c., being:

  1. The finding was that “˜some very rudimentary explanation of the BFA was given to her in English’, not that proper and sufficient advice was either given or understood;
  2. The advice given by the solicitor for the wife was not acted upon, but was acted against; and
  3. Reliance by the husband on the “advice” overlooks the proposition in Thorne v Kennedy that the wife’s insistence to sign the BFA against the advice can be an indicium of undue influence.”

The Full Court agreed with that contention.

The husband attempted to distinguish this case from Thorne v Kennedy. The Full Court agreed with the submissions of the wife that the husband’s challenges to the primary judge’s findings failed. The Full Court said:

“Those findings were available and open to his Honour.” 

Ground 3 relied on the management of the burden of proof. The husband contended that the primary judge failed to correctly apply the burden of proof to the wife’s claim for undue influence.

The court referred to paragraph 34 of Thorne v Kennedy.  The methods by which you prove the existence of undue influence were listed as:

  1. Direct evidence;
  2. Presumption;
  3. “Common experience gives rise to a presumption that a transaction was not the exercise of a person’s free will if (i) the person is proved to be in a particular relationship, and (ii) the transaction is one, commonly involving a “˜substantial benefit’ to another, which cannot be explained by “˜ordinary motives’ or “˜is not readily explicable by the relationship of the parties”.

The court at paragraph 53 said:

“The findings of his Honour at [214] and [215] established the presence of a particular relationship between the husband and wife where the husband had a position of ascendancy and the wife was in a position of dependency. We fail to see why those findings would not fall into the third category recognised by the plurality in Thorne v Kennedy, and which then requires the dominant party to demonstrate that the transaction was the product of the weaker party’s free will.”

The fourth ground dealt with the proposition that the trial judge had erred in finding the wife was at a special disadvantage and that the husband had unconscientiously taken advantage of it.

The Full Court relied on Thorne v Kennedy at paragraphs 38 to 40 quoted by the primary judge.

Thorne v Kennedy at paragraph 40 said:

“Although undue influence and unconscionable conduct will overlap, they have distinct spheres of operation…there are many other circumstances that can amount to a special disadvantage which would not establish undue influence.”

The Full Court determined that this ground had no merit.

Ground 5 dealt with the court’s jurisdiction to set aside a financial agreement. At paragraph 73 the Full Court said:

“We consider that the primary judge did not misconceive the nature of the court’s jurisdiction to set aside the BFA.”

Ground 6 dealt with the wife’s failure to call her solicitor.  The Full Court said at paragraph 81:

” It was plainly open to his Honour to accept, as he did, the evidence of the wife given in cross-examination as to the circumstances in which she executed the BFA, and the absence of evidence from the solicitor could not prevent that outcome.”

Ground 7 dealt with an aspect of the same issue that the judge erred in finding that the rule in Jones v Dunkel did not apply to the wife’s failure to call her solicitor. The court found that there was no merit in this ground.

The appeal was dismissed, and the wife’s costs were ordered.

This case is important because it underlines the importance of paragraphs 38 to 40 of Thorne v Kennedy and reminds us of the very basic idea that insisting on signing a BFA against advice can be an indicium of undue influence just of itself.